High Court Orders Claimant To Pay Defendant's Costs After Recovering Just 1.6% Of Its Professional Negligence Claim

The decision suggests that a claimant who recovers only a tiny fraction of the damages it seeks will not ordinarily be treated as the successful party for costs purposes.

The High Court has ordered a company in liquidation to pay 85% of its former auditor's costs of a professional negligence claim, despite the company obtaining an award of damages in its favour. The court held that the company was not the successful party where it recovered only around 1.6% of its damages claim. The court also held that the company should pay the auditor's costs in full from the date on which it should have accepted the auditor's Part 36 offer: The Wine Enterprise Investment Scheme Limited (In Liquidation) v Crowe U.K. LLP [2026] EWHC 1662 (Ch).

The decision considers and applies existing authorities on the identification of the "successful party" for costs purposes. It illustrates that, where a claimant recovers only a tiny fraction of what it sought, the mere fact that it obtained a money judgment will not necessarily make it the successful party. Each case will turn on its facts and the court will ask who, as a matter of substance and reality, was the winning party. An important consideration is likely to be whether the claimant would have brought the claim to obtain the recovery it ultimately achieved. 

The decision also illustrates that there is a high hurdle for showing that it would be unjust to apply the usual Part 36 consequences where a party has failed to beat its opponent's offer. The court commented that the effectiveness of the Part 36 regime would be eroded if courts were to embark on detailed consideration of whether an offeror had failed on some issues, or acted unreasonably in taking particular points, in order to justify some deduction from the usual order.

Background

The claimant (the "Company") was a wine investment scheme company placed into liquidation and acting by its joint liquidators. The defendant ("Crowe") was the Company's former auditor.

The Company brought a professional negligence claim against Crowe arising from its audits of the Company's accounts, against a background of dishonest conduct by the Company's directors in what was alleged to be a "Ponzi"-type fraud.

The Company's claims in respect of the seven relevant audit years ranged between approximately £3.35 million and £8.42 million. It ultimately recovered £101,965.95 plus interest — around 1.6% of its maximum claim value: see The Wine Enterprise Investment Scheme Ltd v Crowe UK LLP [2026] EWHC 692 (Ch). 

Crowe had made a Part 36 offer of £3.175 million (plus costs), which the Company rejected. Crowe made counter-offers of £6 million plus costs and £7 million inclusive of costs, which were also rejected.

Decision

The High Court (Richard Spearman KC, sitting as a Deputy Judge) ordered the Company to pay 85% of Crowe's costs up until expiry of the relevant period for acceptance of Crowe's Part 36 offer, and thereafter to pay all of Crowe's costs plus interest on those costs.

Identifying the successful party

In relation to costs up to the expiry of Crowe's Part 36 offer, the primary issue was whether the Company was the "successful party" for the purposes of CPR Part 44.2(2). This sets out the general rule that the unsuccessful party will be ordered to pay the costs of the successful party, though the court can make a different order. 

The Company argued that it was the successful party because Crowe had been ordered to pay it money and that, unless and until Crowe protected itself by making an effective Part 36 offer, Crowe was exposed to an adverse costs order. The Company relied on Fox v Foundation Piling Ltd [2011] 6 Costs LR 961, in which the Court of Appeal awarded the claimant its costs where it recovered around £31,000 out of a total claim of more than £280,000, and where the defendant had made a Part 36 offer for around £23,000. 

Crowe submitted that the test for identifying the successful party, derived from Roache v News Group Newspapers Ltd [1998] EMLR 161, was to ask “which party, as a matter of substance and reality, has won?" Applying that test, Crowe submitted that it had won.

The court agreed that the correct test was as Crowe had submitted. That approach had been applied in a line of authorities (including notably Medway Primary Care Trust v Marcus [2011] 5 Costs LR 808) in which the court had determined the defendant to be the successful party where the claimant only recovered a small percentage of the damages claimed. The Company's reliance on Fox v Foundation Piling was misplaced. In that case, it had been common ground that the claimant was the successful party, and so that point did not have to be decided by the Court of Appeal. As had been noted in a number of cases since that decision, it could not therefore be taken as detracting from the consistent line of authority that established the test of who was essentially the winning party.

In the present case, several factors pointed firmly to Crowe as the successful party:

• The Company had advanced seven separate causes of action in respect of seven audit years and made no recovery in respect of six of them.
• It was not disputed that the Company would never have brought the claim merely to recover £139,000; had it sought to do so, the claim would never have assumed the form it did and was unlikely to have been defended.
• The Company had failed on a plethora of issues which occupied a substantial amount of court time and generated significant costs.
• The amount recovered by the Company was very small in comparison with the total amount claimed, and the claim was not brought to establish any significant point of principle.

The court had no doubt that the outcome was properly described as a Pyrrhic victory for the Company and that Crowe was, in substance, the successful party. To reflect the fact that Crowe's defence had not been entirely successful, the appropriate order was that the Company pay Crowe 85% of its costs up to the date of expiry of the Part 36 offer.

Part 36 consequences

Pursuant to CPR 36.17(3), the court ordered that Crowe was entitled to its costs from the date on which the relevant period expired, together with interest on those costs, as the Company had failed to obtain a judgment more advantageous than Crowe's Part 36 offer. 

CPR 36.17(3) provides that the court must make an order in those terms unless it is unjust to do so. The Company did not persuade the court that it would be unjust in these circumstances. The burden of establishing injustice is, the court confirmed, a "formidable obstacle". It would erode the effectiveness of the Part 36 regime if courts were to engage in detailed consideration of whether the offeree had succeeded on part of its case or whether the offeror had lost on some issues before applying the usual costs consequences. 

In any event, the court considered that whilst Crowe had failed on a number of points, and its late abandonment of points had resulted in increased costs, none of Crowe’s conduct fell outside the normal course of hard fought commercial litigation, and like criticisms could be made of the Company’s approach to the litigation. 

Indemnity costs

The court refused Crowe's application for indemnity costs. Although the Company's conduct of the claim had been "untidy, imperfect and lacking in focus", it did not take the case "out of the norm" so as to justify an indemnity costs order. 

The case was not speculative, grossly exaggerated or opportunistic. The Company's rejection of Crowe's Part 36 offer — with hindsight plainly a mistake — was not shown to have been unreasonable: the case involved complex issues, both parties plainly regarded the sums at stake as substantial, and there was nothing to suggest that the Company's assessment of the value of the claim was unreasonable, as opposed to being based on a good faith misjudgement of the claim's strength.